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(Alliance News) - Stock prices in London are seen opening lower on Monday, with equities under further pressure following sharp falls on Friday, as traders continue to digest a more hawkish US Federal Reserve, and a caution that the central bank may hike rates next year.
Asian stocks were hit on Monday, with Tokyo's Nikkei 225 plunging more than 3%.
IG futures indicate the FTSE 100 index in London is to open 25.30 points lower, or 0.4%, at 6,992.17. The blue chip index closed down 135.96 points, 1.9%, at 7,017.47 on Friday.
In early corporate news on Monday, a UK watchdog said it has served an initial enforcement order on Pennon's acquisition of peer Bristol Water, while foodservice firm Kerry Group has struck a deal to buy food preservation Niacet for EUR853 million, days after agreeing the sale of its Consumer Foods' Meats & Meals business in the UK and Ireland.
James Bullard, president of the Federal Reserve Bank of St Louis, told CNBC that "I think it's natural that we've tilted a little bit more hawkish here to contain inflationary pressures."
CMC Markets analyst Michael Hewson added: "It was a move that undermined the entire narrative that the US central bank had been pushing for most of this year, that it wasn't looking to embark on an imminent tightening of monetary policy.
"Given Bullard's Friday comments, tomorrow's testimony to Congress from Fed chair Jay Powell, coming so soon after last weeks press conference will be much more closely analysed for how he sees the US economy, as he briefs US lawmakers on how he and the Federal Reserve see the US economy, along with the timing of a tapering of bond purchases."
Focus will also be on Friday's US personal consumption expenditure, a consumer price index measure. Core PCE is the Fed's preferred inflationary gauge.
The dollar lost ground against major counterparts on Monday, giving back some its sizeable gains from last week.
Sterling was quoted at USD1.3809 on Monday morning in London, up from USD1.3799 late Friday. The euro traded at USD1.1872, up from USD1.1854. Against the Japanese yen, the greenback fetched JPY109.92, down from JPY110.26.
The Nikkei 225 index in Tokyo closed down 3.3%. In China, the Shanghai Composite was flat in late trade, while the Hang Seng index in Hong Kong shed 1.3%. The S&P/ASX 200 in Sydney ended down 1.8%.
Tokyo's Nikkei, one of the worst-hit indexes in Asia on Monday, saw sizeable losses across the board. Carmakers Honda and Toyota shed 3.9% and 2.0%, retailer and Uniqlo owner Fast Retailing lost 4.4%, while Mitsubishi UFJ Financial dropped 2.7%.
Meanwhile, the People's Bank of China left interest rates unchanged again, as expected. The one-year loan prime rate was held at 3.85%, the last time the rate was changed was back in April 2020. The five-year rate also was unchanged at 4.65%.
"The rate is unlikely to change unless there is a shift in the PBoC's interest rate corridor. For now, the bank seems content with its stance," analysts at Pantheon Macroeconomics commented.
Turning to company news, the UK Competitions & Markets Authority slapped water utility Pennon with an initial enforcement order in relation to the company's takeover of Bristol Water.
Pennon bought Bristol Water earlier in June for an equity value of GBP425 million and enterprise value of GBP814 million.
Initial enforcement orders are issued during the CMA's phase 1 assessment of a merger. The initial enforcement order prevents integration of the two businesses.
Kerry Group said it has acquired Hare Topco, which trades as Niacet, for EUR853 million. The preservation technology firm, which has manufacturing sites in Niagara Falls, US and Tiel, Netherlands, will join Kerry's global food protection and preservation arm.
"The addition of Niacet's complementary capabilities will enhance Kerry's food protection and preservation strategy to offer new products and technologies in a broader market," Kerry said.
"Niacet is a global market leader in technologies for preservation. It has clear leadership positions in Bakery and Pharma, and cost-effective low-sodium preservation systems for Meat and plant based food across both conventional and clean label solutions."
Kerry has bought Niacet from funds advised by SK Capital Partners. The deal is expected to close in the third quarter of 2021.
Elsewhere, outsourcing firm Capita said its first half has progressed in line with expectations.
"Capita remains on track to deliver revenue growth in 2021, for the first time in six years, despite the ongoing impact of Covid lockdowns, in particular in its Specialist Services division," the company said.
Capita noted its "significant" contracts this year, including a GBP925 million UK Royal Navy pact and a GBP528 million win with a European telecommunications firm.
It has also progressed with its cost saving programme and is "well advanced in our plans to implement the next phase of our transformation".
Brent oil was trading at USD73.72 a barrel early Monday, firm on USD73.56 late Friday. Gold was quoted at USD1,777.24 an ounce, up from USD1,775.60.
By Eric Cunha; ericcunha@alliancenews.com
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